How to Beat Tariffs and Unlock Global Growth

How to Beat Tariffs and Unlock Global Growth Speaker 1: I want to talk about probably the most said word in these last few months is tariffs. Speaker 2: First off, what I think is getting most affected is brands that have China origin manufacturing of goods. Especially for U.S. brands, your biggest market is the U.S. All those goods are getting heavily taxed coming in. It's a very big change in cost structure than what you had before. If you're someone shipping from China into the U.S., it's even worse. You're getting nuked. Canada has a reverse tariff on the U.S., which is a little aggressive, and U.S.-made goods face that. In some of your tail international markets, for U.S.-made goods, that is where you're going to find markets like Canada have a little bit more of an impact, but they're actually more covered in their home market from a tariff perspective. Speaker 1: Welcome back to another episode of Chew on This. Today, we're going to be talking about how challenging growing brands in the U.S. has been, especially in the last 12 months, and how to unlock global growth. We actually are bringing an expert here, Darvish, who is CEO and co-founder of OpenBorder, and he's going to be breaking down what it takes to take your brand global and what are some of the challenges that brands are facing today in domestic growth. So before we kick in, Darvish, a little bit of your background, and I would love for you to get right into what you're seeing from just a bird's-eye view in terms of brands trying to grow today. Speaker 2: Yeah, totally. So yeah, quick background on us. So I actually started in the e-commerce space back in 2018, actually sitting in the seat you're sitting in today, running my own brands. My co-founder and I I started two brands. One was a men's skincare line called Lumen. The other was an electric trimming brand, Meridian. And both those brands, we actually ended up reaching the nine-figure run rate mark in about three and a half years. And half of our revenue was international. Just a quick story there because it's a helpful context for probably a lot of marketers is our philosophy actually back then was Everybody's talking about indirect consumer. How do we diversify channels? How do we find the next thing? People were back then it was YouTube, it was direct mail, it was affiliate. It was trying to find this next thing to get incremental scale after meta. And I just told myself, I don't know if I'm that good of a marketer. So I'm just going to literally take my US ads and run them in the rest of the world. If you looked at top down, there's just a lot of buyers that are being left over. Every major consumer brand or consumer conglomerate takes their brands international. So why couldn't I as an online brand do that? So this kind of somewhat naive bet that we took early on paid off really big for us in our growth. And what we found basically is that as brands try to do this motion of selling internationally, they run into a ton of problems. They have a lot of ambiguity, like is it worth my time? How big can this be? What do I do with ads? Do I localize my website experience? A ton of logistics problems. So that story and that experience is what ultimately led to OpenBorder. We were fortunate to have a transaction for that business in 2021. And basically as part of it, we negotiated the right to take all of our international team, spin them out into a new company that basically helps brands like Avi sell internationally. So that's kind of a little bit about us and how we got here. And so yeah, now I work with hundreds of merchants helping them sell abroad across direct-to-consumer, Amazon, TikTok shop, brick-and-mortar retail. I'm so excited to dig into that a bit. Speaker 1: It's incredible. So I mean, you know, when you look at obviously the way you guys have built OpenBorder and what you're providing brands, obviously is a great way to be able to say, hey, you have no excuse not to be able to explore this. Now that you have hundreds of brands, give us a little bit about what you're seeing and how those brands are Especially over the last 12 months, we've seen a lot of different things. You know, we've seen some brands rebound back to like, you know, just around COVID days. And then you've seen some brands really struggle, you know, post Q4 last year into this year. What's going on? Because there's also a lot of external factors going on with meta changes, tariffs going on, you know, consumer sentiment being down. But from your view, what are you seeing as some of the most common patterns in brands? Speaker 2: Yeah, so maybe putting international aside first, and I'll touch on how international fits in it. I think overall, like my general view is there's a faster realization of the outcome of your brand today than there was before. So we're seeing brands that get stuck, get stuck faster. We're seeing the brands that have product market fit reach bigger scales than we've ever seen, right? So you can look at even like the David Protein example. It's a brand hitting nine figure revenue in a year. This is insane to think about before. You know, before it was like 10 million a year. What's crazy now 100 million in a year is maybe possible and then probably that won't be the only brand that does it. I actually think that like in the next like year or two we're going to see more of that happen. So we're seeing this kind of polarization of outcomes I think more and more so. In our customer base we're seeing that too. We're seeing the people who hit the roadblocks feel like they really hit a roadblock and the folks who've We're breaking out, breaking out with things that everyone kind of scratches their head and feels almost a little fun of. Can I get on this ride in some way? So that's what I'm seeing. I think that's just a combination of a few things, which ultimately is one, When you have a brand that has real product market fit, tariffs, consumer sentiment, all these things kind of go out the door. It's like this is a unique product, a unique value proposition, a unique format and people will just buy it. So that's hard for everyone to get and if I had the format for that, I'd be doing that consistently but that occurs. Now, that's why tailwinds aren't affecting the big winners. Tailwinds are affecting everyone else and they are affected by, they're affected by tariffs, they're affected by retail decisions that target if they're not looking to diversify in their assortment anymore. So this is happening in the mid-level, the non-high-high performers, they're feeling this in every way. And so that's why I think That's what's happening on the tailwind side, or sorry, on the headwinds. Headwinds aren't affecting the big guys, or the fast-growing guys, and they are affecting everybody else. And then on the tailwind side, I think what's actually happening is like... Meta is getting better. It's getting easier to use. You don't have to be as smart to be an ad buyer as you used to be. And as these tools become easier, as creative becomes easier to do than it was before, as the playbooks become easier, it's like now everyone's just focused on getting the right product, and now everything else after that becomes a little bit more seamless. The motion of going from direct to consumer to retail is more real now. Retailers are able to take bets on those folks. So I'm just seeing this, I'm seeing the, I'm seeing both ends of it. I'm seeing founders come to me with numbers that make me super bullish on e-commerce and more particularly in consumer. And I'm also seeing a ton of brands that are awesome entrepreneurs who just aren't unique enough. And that's what I'm seeing. Speaker 1: Really interesting. And then, you know, I think there's been this world of where a lot of us, when we look at the playbook, especially starting a brand or growing a brand, it's like, all right, really champion a platform, whether it's Meta or TikTok or whatever you may be on. Then layer that with a little bit of marketplace, such as Amazon. Potentially look at retail after that, right? And it's almost like, I think up until maybe really last year, it felt like international was one of those things that you get to when you get to. And you layer on when you see some demand inbound and you say, oh, let's just cater to it. But I feel like there's been a pretty large shift now where I think you hear brands early on. I mean, even someone like David, you gave an example. They're talking about international within the first six months of their company growing and now 15-20% of their revenue is international. What is the shift you're seeing? Why are people considering it so much more and why should many brands start to consider that? Speaker 2: Yeah, so I think for the winner brands, you know, not to say that everyone's, they're not a winner, but the brands are really in that trajectory where they feel almost close to, they've really found something that's hit a chord with modern consumer sentiment and shifts. Those brands I think are going international faster because they're like nothing is going to stop them. And almost anywhere they go they're going to find some level of success. And so if you're in that category, that top one percentile brand, you go international now. Nothing's stopping you. You should jump into it. And that's kind of why you're seeing that. That's what you're seeing on the upper end. I think for the brands that are kind of everywhere else doing good, but they want a little bit more, those brands I think where international is really coming in is diversification. So it is, you are in a world where you're trying to find the right next best thing for you. Is it retail? Is it some new channel? Is it TikTok shop? Can I lean in on Amazon some way? Do I do an influencer strategy? International just becomes a thing in that bucket you can look at and what we try to show brands is really with a partner like us, the level of effort to potential reward of size of prize of international ends up stacking very high on any dimension you look at. There's very few things that will be with a partner like us as easy to implement that can give you double-digit revenue growth in a single year and so that's where those brands are looking at it. It's a measured test. It may not work for everyone, but 30 to 40 percent of folks will hit those numbers, and that's a good hit rate on these types of experiments, right? So that's where I see the next year kind of going, and the winners... They're just winning and we're all helping them out in some way. Speaker 3: From a tactical standpoint, if a brand wants to come in and start heading in that direction, right? If somebody comes to you and says, okay, I want to go international. What's the best way to actually just do it and test it? What is the first thing that you're telling them to do? Speaker 2: There's like two philosophies on going international. I think the older school approach was, and there's a hybrid you can take, but I'll give you the two ends of it. You know, one end of it is you go do some deep market research. You figure out where you think your product will resonate. You look at your own customer data and say, where are people coming to you from? And you pick a point of market to go enter and you try to build a presence there. You launch the PR, you launch, you do a full activation of the market. What I found is that for digitally native brands, it's an unnatural motion for them because not how they tend to grow their business, at least after the first early days. And the risk factor there becomes very high. You put a lot of resources and you may or may not hit, like you still have the same 30, 40% hit rate on if international work for you. And you're usually limiting it now to like one country. So what we tend to prefer brands do or recommend you start with, if you're the type of company who heavily paid media driven, you tend to be very, any test you do, you want to see that it pays out in a certain amount of time. You want a risk adjusted return on what you do. What we say is like, look, Basically, the idea is take your current English ads, pick all the English geographies, call them Canada, Australia, New Zealand, the Nordic countries, the Benelux regions in Europe, Dubai, Singapore, APAC regions where it makes sense. Target them with your current English ads. Don't do any localization on the ad side. Do some light localization that's non-language on your storefront, so still stay in English, and everything else can stay the same. Same social media, same email account, same SMS strategy. It all flows through. With that, you may actually be able to find your first pocket of winners, and you can then double down on them. And so I think that was like how you guys started out early on. You were overthinking it, but you found, like if Australia was a big winner for you, you'd double down on it. Canada, Eventually started working double down. Europe took a little longer. So that will differ by brand. You know, supplements brands, we do see stronger affinity in like in Australia, Canada. We see different things in like European or in like apparel sector. So there's some geographic affinities, but you can figure those out pretty quickly. So that's generally what we say to start. And logistics-wise, it's shipped from your current warehouse, right? So you're not storing goods in a new country. You're not relabeling your products. You're not thinking about packaging your ingredients. It's take your current US product as it is, ship it from your warehouse, run ads from the same ad account you already have. This is like a one and a half person, like attention project to go and test. That's the type of motion we try to start with. Speaker 3: I think even for us, I mean, we did a lot of testing and especially with the help of you guys, you know, being able to make it seamless for the consumer, right, across different, you know, we tested in Australia and New Zealand, right? Now, shipping from the U.S. is expensive, right? Our average is three times the domestic shipping rate, right? So now, imagine you're coming to the website, they love your product, they hit add to cart, and then they're hit with this fat, you know, shipping rate that's in the checkout. And your abandoned carts skyrocket, right? I think what's been a really good strategy for us, and I'm curious your thoughts and maybe some other tips and tricks here is, you know, you don't necessarily have to sell at the same price either, right? A lot of testing that we did was increasing prices for international and then in the checkout offering free shipping, right? So I'd rather Sell you on a product at a higher price point, you getting to check out and be like, oh, you guys are doing free shipping internationally, I'm sold, right? Versus like lower price point and then I get to check out and it's like, oh shit, I got to pay $25 for shipping and then duties on top of that. That was probably one of the biggest changes that we made which helped improve conversion rate, which I don't think a lot of people can do Just like out of the box. I think OpenBorder does a really good job at helping achieve that. Speaker 2: Yeah, actually and interestingly enough your story of how fast you guys did that and like it was very clear Australia was not working for you. You did this adjustment. It started to blow up and became a big part of your business. That learning made us want to make it even easier for folks to do it. So now we've actually have a self-serve tool in the platform where you can A-B test pricing by country on the base price. Speaker 1: We'll bring it up here on the document. Speaker 2: On the shipping price, on the base price, and so you can actually then go and without any code, go in and say, all right, for this country, I want to actually go and see, should I have free shipping at a higher price or not? And now we let the customer do that themselves very incrementally. And we do find some pretty real LTV CAC bumps from doing that. Speaker 3: Yeah, that makes sense. I mean, the friction points is, Honestly, what stops people from going international, right? It's like the shipping costs. It's also like, how do you even handle duties and things like that? Customs, right? Because I feel like a lot of, even those laws change pretty frequently, especially during this time. And then for a brand owner, it's like, you just want to focus on like, all right, let me, you know, set up ads and see if it works. But then you have like three other, four other things to worry about that you have zero knowledge on. Speaker 2: Well, it was interesting when I first met Ron and tried to tell him where we can help him with international. I realized he didn't even know these problems were ones he had. Like you guys were shipping, some stuff was getting caught. You thought it was just getting lost packages. You didn't know about collecting taxes up front. So the idea really is, you know, there's a lot of customers that don't know about these things. Our job is to make it so you don't even care to know. So that's the hope. Speaker 1: That's awesome. You know, I think we touched on a lot around The brands that are choosing to do international, they're seeing great results, right? I think growth outside of U.S., you're seeing higher growth in territories outside of the U.S. alone, for many categories, which is an incredible signal, right? Now, I think the one question that still does come up, right, is, all right, well, I'm doing, I'm thinking about Amazon in Canada and I'm doing, you know, DTC here and I'm maybe opening some retailers in, you know, Australia or UK. I think the one other piece about international that is interesting to think about and think through is, How do you think about international across channels, right? So you have DTC, you have TikTok, you have Amazon, you have retail. Give us a little bit of color, how brands, and again, you can't generalize because each brand is dependent on different things, but give us the, again, the most common patterns that you see. Speaker 2: Yeah, so this was a big thing for us. I'm a strong believer actually in Omnichannel. If you're Omnichannel in the US, I strongly believe over time you'll want to be Omnichannel internationally to win in the market. And typically the motion goes something like the following, which is direct the consumer to launch a market. Amazon follows afterwards because what happens is after you get the DTC engine rolling, you pick up a lot of search demand for your brand on Amazon. And you don't want competitors taking that and you want to basically capture the full terminal kind of profitability in the market. So you add Amazon as well. And then once you have Amazon kind of going and you have direct-to-consumer going, then what you'll probably find is in your biggest markets, you will see brands do the same thing in the US. They'll get a sales broker and they'll go talk to the right type of retailer for them in that region or they'll get inbounded and say, oh, whoa, this is a cool brand. Could we have a discussion about what it would look like to be in retail stores? So we have brands representing New Mexico. We have people in boots in the UK. So we have brands now doing this, and it all started actually with direct-to-consumer, Amazon, and then retail added on. So that tends to be the motion in order of these digitally native brands, because they're DTC first. But we do have brands that have gone Amazon first as well. That tends to happen more so if you're in a category where Say you're selling keto products. Keto products could be searched for heavily on Amazon in the UK, and there's not a lot of players there yet. So if you can take a US listing with 10,000 reviews, port it over into the UK, all of a sudden you have a very competitive product. You can get to the first listing, first rank really fast. So there are some examples where Amazon can be the entry point, but generally we are seeing brands that are multi-channel in the US become multi-channel internationally pretty fast. Speaker 3: Are there any challenges for brands that want to get into like say the Amazons of the world and especially for us, right, like supplements. We're heavily regulated in maybe international countries less than the US. How do you guys help some of these brands kind of get into these places when you may need to change a few things about the label or the supplement panel? What would you suggest people do? Speaker 2: Yeah, fantastic. So we'll do the supplements example because it's actually one of the more nuanced tricky ones and then everything else a little bit easier actually. So for supplements, you know, whenever you take goods into another country, that is when you get to start worrying about the ingredients and the concentration levels of your product. And so when you're shipping from the US, you guys are fine. Right now you haven't done anything. You're just fine. Now you're starting to have that conversation of we're moving you into these markets. You're importing it for commercial use to be resold and now governments will care. Canada will say, hey, we regulate this stuff that comes in and it needs to be registered with us and there are certain rules it has to follow. What we found generally for supplements is Canada and Australia tend to be painfully long processes to set up and there's really no way to get around that. It just takes about 9 to 12 months up end to end to get new products into the country for the first time. The UK and EU though are very good markets regulatory from the US. Usually what we're seeing with supplements brands, this is our number one category actually, is we can take your existing formulations as they are into those markets, we just have to change the label. So what we're doing actually usually is we're going and redesigning the label, adjusting the claims, make sure the label fits the local kind of requirements. We register the product locally and then even you'll see it like you'll have to have what they call a responsible party. So that new label we create, it'll have something like sold by OpenBorder GB on the label in the UK or in the EU, wherever it's sold. So we take care of all that for a brand. We can do the physical labeling or just design it for you, do it with your manufacturer, but we do do that checking for you in those jurisdictions. And so every category, electronics, apparel, Well, some sort of thing that they care about in beauty is testing based on the jurisdiction. But we've built up some pretty good experience now across the categories, so we can help you think through what that looks like and share the timeline. But for supplements brands, I'd say like UK, EU, you could be up and running four to six weeks, maybe eight, oftentimes without any reformulation. Occasionally, you'll have to reformulate and that's a longer process, but broadly speaking, we're not seeing that. Speaker 3: For brands that want to do this, right, does the team at all need to change? Do brands feel like, oh, I need to have somebody that's managing international all together, or can brands kind of just take their current team and just do it? Speaker 2: Yeah, so when we did this at OpenBorder, or sorry, at my last company, at Pangea, where we had Lumen and Meridian, the brands I talked about, We had a full team on international across operations, compliance, finance, because we had entities in each region, and that becomes very complex. With a partner like us though, the idea is that your current team doesn't need any extra resources to do it. You can just make it a portion of a little bit of the ad buyer's time, a little bit of your email marketer, a little bit of your ops person, and together with that you guys can actually all manage. We're kind of your ops team basically. So yeah, I would say like you don't need a dedicated team to it. I actually usually recommend against it anyways, because I think it's better to incrementally move and you know, the best example I have of this actually what really showed me is for at some point scale, you'll have individual local teams in every region. Most people who are building brands, even the ones who have amazing good exits that have life-changing financial outcomes, will never get to that scale, if that makes sense. The biggest tell-tale for me was actually at Lumen & Meridian when we used to run ads in French, Spanish, German, Arabic, Hebrew, and what we found oftentimes is that the most performing ads Weren't ads shot by a local team in the region that we found? It was actually ads that we took that were created by the U.S. team that we just dubbed into the local language. And the reason for that, I think, is because the U.S. team has gone through 500 iterations of how to tell the Lumen story, of how to sell dark circles, of how to sell this moisturizer. And these other teams are just learning that for the first time. And so what we're learning at least in like direct response marketing is That storytelling is what matters. It's not the production value. And so when we see that happen, not just with us, but other brands as well, it tells me there's a lot of value in this kind of, some of the central value you have is hard to recreate. It's very expensive to recreate. So I actually advocate for lean teams doing this and that's the beauty of it, right? You can have a 20 person team, have a global $200 million plus business. I think that's the goal. Speaker 3: That's amazing. Speaker 1: It's incredible. You hit on so many good points and I think one thing I want to go back to is there's a consideration phase and then there is a phase where people look at the opportunity and then again there's been brands that I know you've even asked me to speak to and they're just like, it's not a priority. And I want to hit this point because I feel like Typically, that answer is not stemmed from because the solution is too complex or because the offering is not understandable, but it's purely because I think there's still a portrayal of how much work goes into it. And I think you've kind of started touching on it, which is like, you really just need a little bit more time from each person that's already on the team. But maybe really quantify that, right? Because I think some brands do still get hung up like, hey, my media buyer's already at his wit and work. He can't do more. He can't think about more things. Or my creative engine, we barely can get enough output for domestic. How are we going to do this? I think there's some of these pieces that I think Feel like they're like little myths that need to be busted. So let's talk about those. What are some of those upfront challenges that come up and what's the real way to think through those? Speaker 2: Cool, yeah, so maybe we'll walk through maybe the two or three core departments and what I think the time looks like to set up and then time looks like ongoing. And then there's a conversation of is that still too much or not for a brand, right? So on the media buying side, No, you're not using new creative. What you're really doing is you're copying and pasting your current campaign. You can still stay the same bidding strategy. You can make it a little less or more conservative, but you take your current campaign, you copy it over, you add new countries for targeting, and the ad assets are already there, right? So you're not changing any of your creative pipeline. So I would actually say for the media buyer, it should be viewed as like, hey, I can spend an extra 15 minutes a day to check this, and I should be okay. You know, maybe 15 minutes at the beginning, 15 minutes at the end, 30 minutes a day. At the upper end, probably, that's actually your I'm Chew on This. Creative team doesn't even need to know this is happening for now. They just keep making creative as is. So I think marketing is like, okay, emails, everything will flow as is through your website. So it's all good. Let's go to operations. That's where things get kind of tricky. Speaker 3: One question on email though, right? Because international shipping may take a little bit longer, right? Are you advising brands maybe changing flows in terms of just timing to send out maybe the first email until they actually get the product? Speaker 2: Yes, if you have time-bound emails, like if you have emails that say, hey, welcome, you received this product, you need to do X, Y, Z, then yes, you would need to make those adjustments. So that's true. Like if you're a repeat purchase product, subscription-oriented, then this happens. I think in categories like apparel, it's less of a thing. Speaker 3: Very specific, yeah. Speaker 2: You guys do face that more. You're a big category though, so it's important. So I think that's fair. That's about what the email Person has to do is reconfigure some of the timing, right? That's a one-time setup, I'd say, that they can do. And then basically, that's your marketing side. Social media doesn't change, creative doesn't change. Now you go to operations. For operations, we tell teams that it'll take three hours of your time to get OpenBorder integrated. There's an onboarding call, it's 30 minutes. There's a QA call. It's a final launch, 30 minutes, and then we give you another hour and a half to internally get ready for meetings, prepare information. So that's what we say. And I often actually in the sales process say three to five hours because the three hours seems not credible. But our account managers always say, hey, it's not that much time. So the team won't spend that much time getting set up. And on an ongoing basis out of any shipping relationship, you will have some maintenance of things you're looking at. So add like maybe 30 minutes a week of checking. 30 minutes a day, 5-10 minutes a year there throughout the week. That's about what I see the operations person as working with us on Slack. So that's your ongoing maintenance to kind of get this test up and running. And I compare that to like anything, TikTok shop, YouTube, affiliate, direct mail. You're a lot higher in many of these cases, right? Like you're thinking about entirely new creative, targeting, asking people for advice on how to do this thing. So this world is going to be a lot more in your comfort zone, a zone of genius in terms of testing. Speaker 1: That's a really good comparison you made at the end, like when we try and go and say, hey, we want to go and test Applovin, like you got to rethink everything, the creative, when you think about, oh, I want to go and test TikTok, like, you almost have to rebuild like, you know, creators, this, that, you know, if you look at international more as like just a new platform, Right. It's almost probably the least barrier to how much work needs to be redone. Speaker 2: And like, yes, there are. And I think TikTok Shop changed the narrative a little bit because TikTok Shop can be a 5x multiplier in your business. And so it does take the time. But a lot of other examples we gave there, you'd be ecstatic if it was 10, 15, 20 percent bump of your profitable media spending in a given quarter a year. International is that, right? So it's like that's where you start to have to look at it. But TikTok Shop is 10x the effort of what I just described. It is like a full machine you have to build. So yeah, that's like where I think the real ruthless, hey, am I prioritizing best Efforts toward things starts to matter, especially this digitally native context. Speaker 3: So what would be the following steps, right? So now you've gotten set up in Australia, New Zealand, let's call it, right? You've duplicated your main campaigns. You've set the location to, you know, Australia, New Zealand. Sales are coming in, right? Speaker 2: Yeah. Speaker 3: How do you think brands should think about maintaining and scaling in these countries? Just given that Total addressable market is much smaller than the U.S., right? So how can brands think about, okay, well, am I going to deplete the country completely? Because what's the population in Australia, like 20, 30 million compared to 300 million plus in the U.S., right? How do you tell brands to think about growth and scalability in these different countries? Speaker 2: Yeah, so two things here. One is I think if you step back from it, I think at scale, good international strategy will over time be 50% plus of your business. And you can see that in a lot of the large consumer brands, they just tend to kind of get there. The EU in overall e-commerce size is larger than the U.S. today. So it's not like these are small markets. These can be large markets with a reasonable purchasing power. It is lower than what we have today, but it is still significant. And that's why cross-border is the fastest growing segment of the world. If you look at income, purchasing power is catching up to the U.S. abroad, not the other way around, right? So it's only moving faster and faster in that direction. So that's the step back view. Now, one step below that would be as international growth, what does it look like? I view it as just like it's a portion of your business that grows with you. So if you thought about the U.S. as like California is like a big chunk of your revenue, California grows commensurate to everything else. It's not like California grows like one and then like New York grows another. And what you find is like in this strategy, they almost become treated like that. They're extra states that speak in English, you know. So like you're not gonna, you're gonna just as you keep spending, And like as you unlock more brand awareness, as you unlock more creative wins, those creative wins tend to translate over to the other markets as well. And they kind of grow with you. So what you're saying is like, this is my net I grow with. I'm going to grow from 0 to 10. If you do that with international, you may grow from 0 to 15 or 0 to 13, right? If I have a time of 50, With international, maybe you're at 80. That's the kind of way you can think about it. There's this extra thing that carries along with you. And then in your biggest markets, you can then weigh where do you do these extra, more high-touch type activations. You may do pop-ups in malls. You may do influencer activations. You may do things like this that help build your brand. You, though, start to say, in my largest markets for you guys, Australia, Maybe it makes sense to do something in Australia just the same way that I may do something in New York. Those would probably be equal weighting before you do something in Georgia. So you'd go New York, Sydney, LA. It starts to become like that. And so that's how I start to imagine people starting to think about it. So that's a flavor of how I think you could reframe what this looks like over time as you're building up. And then as you get scale, when you get to a $20, $30, $40 million business internationally, now you can start to Then you may start to take the levels of localization deeper, but you're doing that in every portion of your business, in every channel, in every facet, you're kind of doing that. And this will seem the same way based on the size of its return. Speaker 3: I have a question. Just because you have access to like these hundred plus brands that are going international, does expanding into international like DTC and then maybe TikTok and Amazon, does that become a selling point for the brand if they're looking to go and raise or even exit? Speaker 2: Yeah, so I think this question it becomes like, I think it's a It's a TBD in terms of how I think buyers will look at this over time. But my current, I think historically the view was when you're launching in like retail stores specifically, the idea was you do a bunch of stuff in the US, you have one or two key activations, maybe in Abbots or one more place in Germany. And with that, you've proven that international can work. We haven't taken advantage of it and now someone can come and buy you and do the rest of the work for you. I think the way I'm describing international and this is what we saw in our process and many of brands in OpenBorder have gone through big fundraisers, big secondary events, acquisitions in our time. Bloom did that recently, like a couple years ago. So like we've seen it in our brands as well. International in the way that I'm describing it isn't a full launch. It is like servicing the demand at the bottom of the funnel that you already have. You haven't done everything yet. You're still kind of doing it as you grow. So I think that in that light, I'm not seeing people discount it in that world. I'm seeing it more in the Yeah, I'm a Sephora brand and my international not yet. Is that open to me? I'm not seeing it in the digital world. In the digital world, I'm seeing it as just your multiple just is applied on a bigger base than it was before. So yeah, you maybe make an extra 20, 30, 40% on your take-home. That's generally the way I'm seeing it in these conversations. Speaker 1: Makes sense. I want to talk about probably the one thing that is probably the most said word in these last few months is tariffs. And I feel like, at least me, I'm still not fully understanding where it's at. And I think it's partly because there's so many changes. But then there's also partly because sometimes you don't even know what's really going to impact you. Because I think for us, parts of it feels like, OK, well, we'll We'll wait for our manufacturer to tell us something. And then, you know, you look at the other side of it, you see businesses shut down, you see businesses have to completely pivot. You know, what are, you know, what are tariffs really affecting? How does this maybe impact whether or not and how to think about international strategy? And are there ways to even take advantages here, right, with tariffs? So maybe you can touch a little bit about what's going on in that space. Speaker 2: Yeah, totally. So first off, what I think is getting most affected is brands that have China origin manufacturing of goods. Because those are the brands that, especially for U.S. brands, your biggest market is the U.S. All those goods are getting heavily taxed coming in. It's a very big change in cost structure than what you had before. If you're someone shipping from China into the U.S., it's even worse. You're getting nuked pretty hard. So that's why you guys are kind of in the middle ground right now is because you're U.S.-manufactured. A lot of the big things that have been happening are on really certain countries, particularly China-made goods. Now, yes, Canada has a reverse tariff on the US, which is a little aggressive, and US-made goods face that. So I think in some of your international markets, for US-made goods, which is a typical more like supplements, some beauty brands, That is where you're going to find markets like Canada have a little bit more of an impact, but they're actually more covered in their home market from a tariff perspective. If the brands that are going down are usually in these other electronics, apparel, they're fundamental overnight, my COGS rose a ton. Those brands tend to have COGS be a higher percentage of revenue than in beauty and supplements too. They care a lot more about that number. In a beauty brand, you can have 90% product margin, 95% plus product margin. That went up 2x, you're still alive. But if you told me an apparel brand's COGS went up 2x, you're dead. So that's kind of where the death, that's why that, that's at least what we're seeing. A few things and tactics I'd say everyone could go look into. Number one is duty drawbacks. So if you are someone who manufactures outside the U.S., you import into the U.S., now you're selling into another country. So this is apparel brand I manufacture in China. When you bring the goods in from China and the U.S., you owe duties on them. But if you then sell them finally to a consumer in Canada or the U.K., you can claw those duties back. Which means that that double cogs doesn't apply to the Canadian consumer or the UK consumer. And so that means that actually what you're looking at now world is if you're a US brand in a world where you manufacture in China, your cost basis ...is your COGS basis is actually lower internationally than it is in the U.S. Wow. And so when people talk about will you find lower CAC, well maybe you'll find lower CAC, but you also have lower COGS too. So that's the world of data drawbacks, which is I think the one thing people could look into if you're manufactured outside the U.S. really. Second area I think you could, folks can look into is if you're in lightweight categories, call it sub one pound. So super lightweight, shipping from manufacturer direct. So this is something we're starting to see more. We have now brands shipping directly from India, from Southeast Asia directly. And we're opening up lanes now there as well. So if that's something you see brands doing, they're manufacturing those regions. You could say, hey, why don't I service All of my international volume from those regions directly and then in the U.S. later do it from there or from the U.S. itself. But that may add some nimbleness to what you have and it also is better cash flow cycle. You're not paying the duties up front ever. Internationally, you're actually just paying them once in the final sale. Not to bring them into the U.S. and then claw it back which takes a little bit of time to get the money back. So that's another thing that we're seeing is moving shipping to the manufacturer. If you're fortunate enough to have low enough weight of shipping, that's the only way the math makes sense. So that's probably area number two. And then let's see, what else do we see with tariffs? The last one is a gray area, so I wouldn't say we're advocating for this, but it's an area that you could research and we can help you research, which is just For international sales particularly, which is classification of your product, so there's the HS code, which is like the harmonized tariff code of where your product fits. There are different levels of these codes, six, eight, ten digit. Many folks don't go all the way to ten when they classify. If you go to ten, you may find that your product can be put into a category that can be more exempt from certain tariffs than others. So I think getting smart on your options there becomes very important. Speaker 3: Thank God we manufacture in the US. Speaker 1: I want to touch on and I know we're gonna wrap up soon but I want to be able to touch on in terms of you know you kind of went into in the beginning but Choosing where to go for international expansion. I think there is expanding and then there is expanding correctly and methodically. We talked a lot about Australia or Canada today, but there may be some brands that I think get a little bit skewed away from international because the one territory they did try didn't work out. Get us through those experiences because I want this episode for people to be like, oh, yeah, that was me. How else should I have done it, right? Yeah, how else should I think about it next? Choosing territories, choosing how to get, you know, how to pick and where to go. Is there A methodical way to do it or is there just a patience and test as much as you can? Speaker 2: Yeah, so I think I'm biased by this because I've seen all the edge cases and that makes me always believe you can't, unless you've done very thorough research, a little bit of market testing and there's very clear signals to show you which market will work for you. I find most brands though, That's not where they are. And I've just seen too many examples, even you guys, but I think when you first started, you were just doing Canada. And I was like, hey guys, like, try these other markets. Like, you wouldn't have done Australia. I feel like if we didn't just, that one Slack message pushed you to go try Australia, you would have thought international was dead, right? So like, you guys were one example. I'll give you another example at Meridian, our second brand. I think like, manscape type, you know, sensitive trimmer. The Middle East was 50% of our revenue up until I want to say like six, seven million dollars of like run rates scale. And we would have thought the brand is dead actually without that kind of takeoff early on. Now as we grew and we figured out we got enough like release valve from international to invest into the U.S. we figured the U.S. out now the U.S. grown to the appropriate size but like this is like Israel and a couple other Gulf countries driving the majority of the volume in the early days. And so would we have guessed that? Absolutely not. Turns out back then the brand, the brand is now very gender neutral, but back then the brand was very focused towards men. It's just a bunch of hairy dudes there, you know? And like, so could we research it and figure it out? Yes. But would anyone have recommended to go into these very small populations early on as the international test? No, right? So I think like we, that's why I tend to recommend Being a little bit broad, if you have the luxury of doing a performance marketing-oriented test. Now, if you're launching on Amazon or launching in retail stores, you've got to do the research, right? But if we're talking about running ads, the cost to run the ad and learn is beautifully low. So that's my view. Speaker 1: Let me crush this dude. This is awesome. Speaker 3: No, this is super tactical. So expanding into Amazon internationally, right? I would imagine there's a lot of hoops that brands have to go through just compliance-wise and things like that. How are you guys helping brands actually get to that point? Speaker 2: Cool. So Amazon, kind of a few pieces to get up and running in Amazon internationally. Number one is the compliance component, which we kind of talked about. This is like your labels, your ingredients, your responsible party that shows you're compliant in the region. So it's these types of things. So it's product compliance. In order to import goods internationally at all, you have to have local tax registration because you get to pay import tax and sales tax. So it's tax registration, entity creation. And then it's local logistics to move the goods around. Then you got the actual Amazon account and managing apps. Those are like the four components. OpenBorder can do all four of them for you end-to-end. So we can review your products. We can import them into the country under our entity and our registration, so you're never creating anything on your own paper. And then we can put them on an Amazon account that is owned by you, and that can be run by either us or you. So our team can do the day-to-day PPC management, listing localization, like done for you service, like an agency for you abroad. Or you can say, hey, you know what, like Darcy, I want you to get us up and running, tend all the taxes and the back office for me on an ongoing basis, but just give me an account for my team to come in and run the ads and do what we do on Amazon. Interestingly, we thought everyone would want to run Amazon on their own. We found over time is that if you really think about it, Amazon is maybe 20 to 50% of a brand's business. And then of that, international will be 30 to 40% on the upper end. And so if you take that, this overall international Amazon becomes a small portion of your overall revenue. And so brands actually end up wanting the done for you service more often than not. So they're saying, hey, like, We know there's revenue here. We know people are searching for our name. We just can't think about it. We don't want to handle replenishing inventory. We don't want to handle the compliance. But if you guys can do that for us, go collect revenue for us and send me a check. So that's 70% of what we do on Amazon. We do have some brands that are a little larger that have also said, hey, you know what? We're ready to start trying this on our own. And now we just hand over the keys to them and say, run the account. So that's our Amazon service. Speaker 3: Love that. So now you're set up, you know, obviously you're sending traffic from your ads to these international countries. You have Amazon set up locally. I would imagine the next step is fulfillment within that actual, the next step would be fulfillment in that country itself. Are you guys helping brands set that up as well? Speaker 2: Yeah, 100%. So cool part about what we talked about on Amazon just now is we've already imported goods in the country, imported them under our name and our entities, and now we put them on Amazon to sell. We can also take them and put them into a warehouse to start selling as well. And that warehouse, we're agnostic of that choice. That could be a partner that we recommend. It could be a warehouse of your choice in the country. And so now what you'll have is you have a world where you have physical inventory sitting in Amazon, physical inventory sitting in a warehouse of your choice, and now you're a direct consumer store, same single multi-currency store connected to the warehouse, shipping goods out. So we've also built like the routing logic so you could say, You know, Obvi has a lot of SKUs. My top five SKUs, I'm gonna store them in the UK, or I'm gonna store them in Australia. Everything else I'm gonna ship from the US. So now you can have some stuff shipping locally, some stuff shipping back from the US, so you're not over-allocating inventory. So that's kind of the shape of kind of what we help brands evolve into, is once you get in country, get your top SKUs in, and over time bring in more and more sellers without over-committing stock. Speaker 1: So I know one of the things that comes up a lot is returns period for brands, but then returns with international, right? That is something that feels a little bit like, oh, I don't know how to manage this. Where is it going to go? Is it going to cost me a lot of money? And sometimes it's one of those flags that makes people like, I don't have time to worry about this right now. How do you guys manage that piece? Speaker 2: Cool. So actually, this is a great one. So for returns, the problems with international first to understand, number one is, it's very expensive for an individual person to ship something from internationally. So if you're an individual person shipping from Germany back to the US, this could be 40, 50, 60 dollars to ship. It's not cheap. They don't have commercial rates like what you guys get. So that's one, that's pretty annoying. Two is that shipping can be pretty slow. So it could take two to three weeks if you get a lower cost option. So these things tend to deter customers from doing international. And oftentimes brands are doing no returns internationally. But ask the question, if you didn't offer returns In the US, what would happen to your conversion rate? It would plummet. So you can't ignore that component of your business. And so what we do is we actually built out local regional return centers for brands to leverage. So let's say you're a customer in the UK, bought a good from Avi, you want to return it. Let's say an apparel brand, you want to return it. Instead of returning it back to the U.S., which is very expensive, we allow them to return it back to the U.K. directly. So we have in-region returns. So the EU will have a center, in the U.K. we have a center, in Australia, same in Canada. If people can return the products locally, we'll then group them together and send them all back to the U.S. once we have enough volume to do it at a low cost. This means the cost of return end-to-end for a consumer in Germany isn't that different than if they were doing a return here in the U.S. And it also means that the speed of getting that return back to the local center is really fast. So it's back in a week, you can check, inspect, and say, do I agree with this return or not? And your customer support can give the A and A. So that's our return to product. I think for supplements brands, where it actually comes in is if you have like a return policy to deter bad actors, you could just return it back to the UK and destroy it on site. So you don't have to say, you can say, hey, if you don't like your product, send it back to us for whatever reason. As long as it's not open, we'll give you a refund, but you got to send it back. And if you had to say send it back to the US is kind of a ridiculous thing to ask them to do. It'll cost more than the product probably itself. But if you can send it back to the UK, it's a regional experience. So they'll do that and then that will deter just a little bit of cancellation or churn from your subscriptions and it can boost up your retention a little bit. Speaker 1: That's awesome. Speaker 3: This has been amazing. For brands that are obviously not advertising internationally yet, they definitely should be because the playbook is honestly pretty easy just from the sounds of it. But one last piece of feedback that you want the audience and listeners to go back and implement in their business starting today, what would that one thing be? Speaker 2: Run the ad. That's really it. You're there. Just press the button. Just press the button. Give it a shot. Speaker 3: Change location and run it. Speaker 2: Duplicate campaign. Duplicate campaign. Target countries? Run. Measure. That's it. Interestingly, we have many customers who signed up and then don't run ads for six months and all we just tell them is, hey, can you please start running ads? What will it take? Speaker 1: You guys just need to start a media component to just run the ads for people. Speaker 2: You're correct. We thought about it. Interestingly, maybe you can even automate that, but that's the idea. So yes, if one thing you could do today? I would tell anyone, even existing customers, is run the ad. See if it actually works. Speaker 1: Chew on that. Speaker 3: If you want more from us, follow us on Twitter, follow us on Instagram, follow us on TikTok, and check out the website ChewOnThis.io.